NE 01-06-4 Sales and Use Tax 2006-07-11

Is the sale of a prepaid satellite TV programming card subject to Nebraska sales tax, and where is the tax collected?

Short answer: Yes -- and the tax is collected at the point of sale. Revenue Ruling 01-06-4 concludes that 'gross receipts' include the proceeds from selling prepaid satellite television programming cards, and Nebraska state sales tax is collected on those receipts at the time and location of the sale. Although Neb. Rev. Stat. §§ 77-2701.16(9) and 77-2703.01(3) generally source satellite programming services to the location where the service is provided, prepaid cards work like prepaid telephone calling arrangements -- the provider often does not know where the service is used, the card's price, or where it was sold -- so the Department lets retailers collect and remit the tax when the card is sold. Because the card sale itself is taxed, the satellite programming services later provided by activating the card are not taxed again. And under Local Option Sales and Use Tax Regulation 9-011, local option sales tax does not apply to direct-to-home satellite programming, so sales of these prepaid cards for direct-to-home service are subject only to the state sales tax (see Revenue Ruling 9-06-1).

Apply this to your situation

This page answers the general question as of 2006. Ezel answers yours, under current Nebraska tax law, with citations.

Disclaimer: This is an official Revenue Ruling of the Nebraska Department of Revenue, a guidance document stating the Department's interpretation of how Nebraska tax law applies. Each Nebraska guidance document carries the notice that it 'is advisory in nature but is binding on the Nebraska Department of Revenue until amended.' Unlike a private letter ruling, a Revenue Ruling is a general statement of Department policy rather than advice to a single taxpayer, but it can be amended, superseded, or made obsolete by a later ruling or a change in statute or regulation, many rulings in this series have been rescinded or superseded, so confirm it is still in effect before relying on it. Nebraska's local option sales and use taxes are administered by the Department, not self-collected by home-rule cities. This summary is informational only and is not legal or tax advice. Consult a licensed Nebraska tax professional about your situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

A prepaid satellite TV programming card lets a buyer activate a satellite receiver and get programming for a set period. This ruling explains how and where Nebraska sales tax applies to selling those cards.

The rule. "Gross receipts" include the proceeds from selling prepaid satellite television programming cards, and Nebraska state sales tax is collected at the time and location of the sale.

Why point-of-sale collection. Normally, under Neb. Rev. Stat. §§ 77-2701.16(9) and 77-2703.01(3), gross receipts from satellite programming services are taxed at the location where the service is provided to the purchaser. But prepaid cards behave like prepaid telephone calling arrangements -- the provider frequently cannot know where the service is actually used, the price the card sold for, or where it was sold. Determining the service location would force the retailer to gather extra customer information and pass it to the provider. So the Department permits retailers of prepaid cards to collect and remit the tax when the card is sold.

No double tax. Because the sale of the prepaid card is taxed up front, the satellite programming services later provided when the card activates the receiver are not taxable again.

State tax only -- no local option tax. Under Local Option Sales and Use Tax Regulation 9-011, local option sales tax does not apply to direct-to-home satellite programming services. So sales of these prepaid cards (and other prepaid programming arrangements) for direct-to-home service are subject only to the state sales tax (see Revenue Ruling 9-06-1).

What this means for you

Retailers selling prepaid satellite cards

Charge and remit state sales tax on the full selling price at the point of sale, at the time the card is sold -- you do not need to track where the customer will use the service. Do not add a local option tax for direct-to-home satellite programming.

Satellite providers

Programming delivered when a prepaid card is activated is not separately taxed, because the card sale already captured the tax.

Common questions

Q: When is the tax due on a prepaid satellite card?
A: At the time and location of the sale of the card -- the retailer collects and remits it then.

Q: Will the customer be taxed again when the programming is delivered?
A: No. Because the card sale is taxed, the satellite programming services provided on activation are not taxable.

Q: Does local option (city/county) sales tax apply?
A: No, not to direct-to-home satellite programming. Under Local Option Sales and Use Tax Regulation 9-011, these sales are subject only to the state sales tax.

Citations and references

Neb. Rev. Stat. §§ 77-2701.16(9) and 77-2703.01(3) -- treat satellite programming as taxable and generally source it to where the service is provided to the purchaser.
Local Option Sales and Use Tax Regulation 9-011 -- local option sales tax does not apply to direct-to-home satellite programming services.
Revenue Ruling 9-06-1 -- referenced for the direct-to-home local-option treatment.

Source

Original ruling text

REVENUE RULING 1-06-4
July 11, 2006
Sales and Use Tax - Prepaid Satellite Programming. THE TERM GROSS RECEIPTS INCLUDES
PROCEEDS FROM THE SALE OF PREPAID SATELLITE TELEVISION PROGRAMMING
CARDS. STATE TAX WILL BE COLLECTED ON SUCH GROSS RECEIPTS AT THE TIME
AND LOCATION OF THE SALE.
Advice has been requested regarding the application of sales tax to prepaid satellite television
programming cards (prepaid cards).
Prepaid cards permit purchasers to receive satellite television programming services for a stated
period of time. The cards are used to activate a satellite television receiver using the receiver’s
speciﬁc and unique identiﬁcation information. Any satellite television receiver compatible with
the satellite programming service provider (Provider) may be activated.
Prepaid cards are similar in function to prepaid telephone calling arrangements. As a result, the
Provider may not have access to the location information where the service is actually being
provided, to price information for the sale of the card, or to information regarding the location
where the card was sold. Pursuant to Neb. Rev. Stat. §§77-2701.16(9) and 77-2703.01(3), the gross
receipts from the sale of satellite programming services are subject to tax at the location where
the services are provided to the purchaser. In order to determine the service location, it would
require the retailer of the cards to obtain additional information from the customer and provide
that information to the Provider. Therefore, the Department will permit retailers of prepaid cards
to collect and remit tax at the time the cards are sold to the purchaser.
Since the sale of the prepaid card is taxed, the satellite television programming services provided
pursuant to the activation of the card are not taxable.
As provided in Local Option Sales and Use Tax Regulation 9-011, local option sales tax does not
apply to direct-to-home satellite programming services. Therefore, sales of the prepaid cards and
other prepaid programming arrangements for direct-to-home services are subject only to the state
sales tax. See Revenue Ruling 9-06-1.
APPROVED:

Mary J. Egr Edson
State Tax Commissioner
July 11, 2006

Nebraska Department of Revenue, P.O. Box 94818, Lincoln, Nebraska 68509-4818

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